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Zenotech Laboratories Limited v/s Dy. Commissioner of Income Tax

    ITA No. 375/Hyd of 2018

    Decided On, 14 September 2018

    At, Income Tax Appellate Tribunal Hyderabad

    By, THE HONOURABLE MRS. P. MADHAVI DEVI
    By, JUDICIAL MEMBER & THE HONOURABLE MR. S. RIFAUR RAHMAN
    By, ACCOUNTANT MEMBER

    For the Appellant: K.A. Sai Prasad, Advocate. For the Respondent: V. Rajitha, Advocate.



Judgment Text

S. Rifaur Rahman, AM:

1. This appeal is filed by the Assessee against order of CIT(A) - 5, Hyderabad, dated 26/12/2017 whereby CIT(A) confirmed the penalty levied by the AO u/s 271(1)(c) of the Act.

2. Brief facts of the case are that the assessee, engaged in the business of manufacturing bio-generic pharma products, filed its return of income for the AY 2009-10 on 30/09/2009, admitting a loss at Rs. 22,07,17,552/-. The case was selected for scrutiny and notices u//s 143(2) and 142(1) of the Income - Tax Act, 1961 (in short 'the Act') were issued calling for books of account, proof of addition to fixed assets, depreciation details, note on nature of business, not eon additional depreciation, proof of claiming of deduction u/.s 35(2AB) and various other details. Since assessee failed to submit an information called for, estimated the profit @ 2.38% of business turnover of the company of Rs. 6.748 crores which worked out to Rs. 16.096 lakhs. When, the assessee filed an appeal before the CIT(A), the CIT(A) dismissed the same.

2.1 Thereafter, the AO initiated penalty proceedings u/s 271(1)(c) and issued show cause notice to the assessee. Since the assessee failed to show cause for furnishing inaccurate particulars of income and unable to furnish supporting information for non-levy of penalty, the AO levied a minimum penalty of Rs. 4,81,808/-, which was confirmed by the CIT(A) when the assessee preferred an appeal before him.

3. Aggrieved by the order of CIT(A), the assessee is in appeal before us raising the following grounds:

"1. The learned Commissioner of Income -tax (Appeals), in the facts and circumstances of the case, is not justified in confirming the penalty of Rs.4,81,808 levied u/s. 271(1)(c) of the Income Tax Act.

2. The appellant reserves its right to add, amend, delete or substitute any ground or grounds during the course of hearing."

3.1 The assessee filed a petition for admission of the following additional grounds:

1. There was no proper satisfaction recorded by the Assessing Officer before the initiating proceedings u/s.271(1)(c) of the I.T. Act, and levying penalty on such improper initiation is not justified.

2. There was clear ambiguity in the show -cause notice itself as to whether the penalty proposed to be imposed is (i) for concealment of particulars of income or (ii) for furnishing inaccurate particulars of income, and as held by the jurisdictional High Court in the case of Baisetty Revathi, in such a situation the penalty levied is not justified."

4. As the said additional grounds are legal grounds, wherein, the facts are on record and facts d o not require fresh investigation, following the decision of Hon'ble Supreme Court in the case of National Thermal Power Co., Limited Vs. CIT 229 ITR 383 (SC), we admit the said additional ground s of assessee.

5. The ld. AR of the assessee submitted that the Assessing Officer initiated the penalt y proceedings by issue of a notice u/s 274 r.w.s. 271 of the Act on 23.12.2011. He submitted that while issuing the said notice, the Assessing Officer did not mention whether the notice is issued for concealment of income or for furnishing of in accurate particulars of income. Therefore, the notice is not validly issued. Consequently, the order passed u/s 271(1)(c) also is not valid. For this proposition, he relied on the decision of the Hon'ble Telengana and AP High Court in the case of Pr. CIT, Vizag Vs. Baisetty Revathi, ITTA No. 684 of 2016, dated 13 th July, 2017.

6. The Learned Departmental Representative on the other hand relied on the orders of revenue authorities.

7. Considered the rival submissions and perused the material facts on record. The issue in dispute is squarely covered by the decision of the Hon'ble Supreme Court in the case of CIT Vs. SSA's Emerald Meadows, [2016] 73 Taxmann.com 248 (SC) wherein the Apex Court upheld the decision of the Hon'ble High Court, in which, the Hon'bl e High Court confirmed the order of the Tribunal and dismissed the appeal of the revenue, who came in appeal against the order of the Tribunal. The Tribunal relying on a decision of Karnataka High Court in case of CIT Vs. Manjunatha Cotton & Ginning Factory, [2013] 359 ITR 565/210 allowed the appeal of the assessee holding that notice issued by Assessing Officer u/s 274 read with section 271(1)(c) was bad in law, as it did not specify under which limb of section 271(1)(c) penalty proceedings had been initiated, i.e. whether for concealment of particulars of income or furnishing of inaccurate particulars of income.

7.1 In the case under consideration, on perusal of the show cause notice issued by the Assessing Officer u/s 274 r.w.s. 271 of the IT Act, 1961, dated 23/12/2011, which is placed on record, it is seen that the Assessing Officer did not mention whether the notice is issued for

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concealment of income or for furnishing of inaccurate particulars of income. Therefore, as per the ratio laid down by the Hon'ble Supreme Court in the case of SSA's Emerald Meadows, the notice issued by the Assessing Officer is not valid and consequently, the order passed u/s 271(1)(c) is also not valid. Hence, we set aside the order of the CIT(A) and quash the order passed by the Assessing Officer u/s 271(1)(c) of the Act. Accordingly, the appeal of the assessee is allowed. 8. In the result, appeal of the assessee is allowed.
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